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Vertical integration
Pittsburgh Tribune-Review
Michael Machosky
February 13, 2006

For at least a year, the American Apparel ads were ubiquitous in the hipper corners of the web -- cutting-edge music site, tech-culture group blog, and so on. Sexy, but defiantly deglamorized, the ads showed a diverse array of cool-but-normal-looking 20-somethings sporting comfortable cotton clothing in basic colors and simple designs.

Curiously, the clothes are not emblazoned with any of the usual giant corporate logos or slogans. Even more interesting, the ads are full of phrases like "sweatshop free" and "made in Downtown L.A." A few wordy ads even talk about their workers' wages -- very high for the garment industry -- as well as health care, and how they're "pioneering new standards of social responsibility in the workplace."

Of course, the usual visual appeals are in the foreground -- wearing this will make you look hot -- but mentioning where and how the products are made is a pretty unusual marketing tactic. American Apparel isn't some hippie cottage industry, either. It's a $250 million, 5,000-employee for-profit company, rapidly becoming one of the top players in the ultra-competitive youth fashion market.

Then around Christmastime, a store opened on Walnut Street in Shadyside, oddly placed amid blocks of pricey, brand-name-driven boutiques. But the ads are changing. There's less talk of sweatshops -- the buzzword now is "vertical integration."

Conventional wisdom dictates that the only way clothing companies can stay competitive is to make their products overseas, in the lowest-wage corners of the Third World. But American Apparel -- started by a French-Canadian, oddly enough -- feels it has found a better way.

"By not outsourcing, we've made the process so much more efficient," says Alexandra Spunt, a content adviser at American Apparel's factory/headquarters in Los Angeles. "Say Mia -- my friend in product development -- comes downstairs, and she shows me a new product. Maybe I've tried it on and she's tried it on, and it's finalized. And it's currently being sewn. That day, I can send out an e-mail blast to all our customers. Or, if I want to be specific, to our Broadway store in New York. Maybe that's where we want to test it. So I say, 'Hey guys, tell me what you think.'

"So we can respond to market demand much faster -- and we don't overproduce a style that's not successful, because we always try it out first in the stores before adding it to the main product line. By saving all that money on that end, that allows us to redistribute it, and pay the sewers living wages."

Most clothing companies design the products in one place, manufacture it somewhere else, and hire an ad agency to sell it in somebody else's stores. American Apparel's approach addresses these disconnections head-on.

"We don't outsource our marketing," Spunt says. "We don't use ad agencies. We don't use professional models. We use our own photographers.

"By the same token, we're not spending a million dollars on an ad campaign. If it flops ... it's not as big a deal."
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